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February 2011 A QUARTELY REPORT #35

CEED Consulting

Business Environment Macroeconomic Outlook Banking Sector Privatization and Investments Capital Markets Business News Economic Freedom In the Spotlight Coming Up

MBO Summary Welcome to the thirty fifth edition of Montenegro Business Outlook. MBO is quarterly publication of pertinent economic indicators presenting a comprehensive view of Montenegro’s business environment. This publication is intended to serve international business people seeking investment opportunity in Montenegro. We welcome your comments.

Business Environment: The business environment in 2010 was characterized by problems related to a lack of liquidity, a lack of financial resources, and a slowdown in the Montenegrin economy. The major laws that influenced business, which were adopted during the fourth quarter, were Law on Excise, the Law on Financing for Local Governments, the Labor Law and changes in the level of the minimum wage. Macroeconomic Outlook: The fourth quarter of 2010, at a macroeconomic level, was the one in which recovery from the financial crisis was seen. Inflation is still at a very low level, and in the labour market only slightly positive trends can be seen so far regarding any increases in wages. Although a decrease was recorded in comparison with the same period last year, the FDI volume is at quite a high level considering the absence of any major privatization takeovers in 2010 (unlike those seen in 2009). Banking Sector: Total bank assets amounted to €3,007.5 million at end-August 2010, €2,907.6 million at end-September and €2,917.6 million at end-October 2010. In comparison with last year, total bank assets during these three months were lower. Total bank deposits amounted to €1,786.2 million at end-October 2010, thus showing a month-to-previous-month growth of 0.2%. At end-September 2010, when compared with August, the total amount of deposits had decreased by 4.5%. Privatization and Investments: Montenegro still has not used all of its potential for attracting new investment. There are three big projects that lie ahead: the construction of a highway, the construction of hydropower plants on the River Moraca and the construction of a new tourist resort on the Lustica peninsula. Additionally, the World Bank’s new strategy envisages a large amount of credit support to Montenegro in the areas of agriculture, health, higher education and science, and in the remediation of environmentally problematic issues. EBRD and IFC also plan to finance some large projects in Montenegro: a power network upgrade, the construction of a highway bypass in Podgorica and to make improvements to the water supply system in the municipality of Danilovgrad. Economic Freedom: According to the report ‘Economic Freedom of the World’ published by the Heritage Foundation and the Wall Street Journal, Montenegro’s economic freedom score is 62.5, making its economy the 76th freest in the 2011 index. Its score has decreased by 1.1 points since last year, primarily because of an explosion of growth in government spending. Montenegro ranks as 34 out of 43 countries in the European region, and its overall score is above average in the world. MBO Interview: Mr. Alexander Avanessov, UN Resident Coordinator and UNDP Resident Representative to Montenegro.

Kralja Nikole 27a/4, Business Center “Čelebić”, Podgorica, Montenegro Phone/Fax: +382 (0) 20 633-855, +382 (0) 20 620-611 web site: e-mail:

Capital Markets: Stock exchange in Montenegro began to operate as one in January 2011 after a technical merger of the Nex stock exchange and the Montenegro stock exchange at the end of December 2010. Following this event, the NEX Stock Exchange ceased to exist as a legal entity. In the Spotlight: Montenegro Becomes an EU Candidate Country. Expert’s opinion: Montenegrian Stock Exchange; Dejana Šuškavčević, MSc, Chief Executive Officer in Montenegroberza. We Introduce: Climate change and global warming; Slavica Nikolić, MSc, CEED Consulting.

Montenegro General Info Area Position Length of border Coast line Length of beaches Climate Average temperatures of air Maximum sea temperature Average num. of sunny days Major Cities Albania Croatia Serbia Bosnia and Herzegovina Sea border


Geographic information 13,812 km² 41º52’ - 43º42’ lat., 18º26’ - 20º22’ long 614 km 293 km 73 km Mediterranean 27.4Co (summer) 13.4C o (winter) 27.1Co 240 Podgorica (Capital), Niksic, Bijelo Polje Border Crossing Bozaj Debeli brijeg Kula,Vuče, Dračenovac, Dobrakovo,Čemerno, Ranče, Bijelo Polje Vilusi, Vracenovici, Scepan Polje, Metaljka ports and piers: Bar, Kotor, Budva and Zelenika

Population Population in country 620,211 Montenegrin population in foreign countries 54,816 Total population 675,027 Number of households 191,047 Source: Census 2003 Transportation Airports Podgorica and Tivat Bar (line to Italy: Bar-Bari, Bar-Ancona) and Kotor Ports (line to Italy: Kotor-Barleta) Railways Bar – Beograd and Podgorica- Niksic Total railways length 249 km Total highway lenght 5,174 km National Parks Durmitor 39,000 ha Biogradska gora 5,650 ha Lovcen 6,220 ha Prokletije 21,647 ha Skadar Lake 40,000 ha

February 2011

Business Environment in Montenegro Overall, business in 2010 was pretty difficult for most businesses in Montenegro. The problems they encountered arose as a result of the economic crisis influenced the entire economy. Most of the problems were related to a lack of liquidity which dominated the Montenegrin economy in 2010. Intercompany debts created a lot of problems and this issue was characteristic during the whole year. Additionally, banks were not very active in agreeing loans for businesses so there was not enough ‘fresh’ money to feed the Montenegrin economy. The final days Montenegro. It



were characterized by changes in the



will be interesting to see how it will affect the current situation,

primarily regarding any steps that the new government might take to enhance the business environment.


last quarter was also characterized by the adoption of

certain laws that will have an influence on the business environment in


Business Environment Macroeconomic Outlook Capital Markets Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up... Business Statistics and Data Business Registration Statistics

(Number of registered companies in Montenegro as of 1st of January, 2011)

Joint Stock Company

The Law on Excise was adopted in order to bring European standards into the area of excise. In this amendment to the law, increases were made to the levels of duty on cigarettes and beer. With this change, the budget of Montenegro is expected to receive more income and the amount of duty paid will be closer to the standard EU level. The Law on Financing of Local Governments was adopted in order to change the source of income for local governments. It is interesting for the business sector that some taxes that were paid at a local level have now been abolished, so businesses will be relieved of paying these in the future. These taxes are primarily taxes paid on a name of a company (the level ranged from €50 to €500 on an annual level), tax on consumption and tax on game on chance.

It is expected that the removal of these taxes will positively affect the business environment. Also changes were made in the area of property tax. Instead of tax being charged at a level between 0.08% and 0.8%, the new tax will be charged between 0.1% and 1%. It is expected that this will bring in additional money to enhance local budgets. Municipalities will also receive a higher portion of any funds resulting from concession fees in their territory.

The Labor Law was supposed to be amended during the last quarter of 2010 but it didn’t happen. The main reason for changing the law was the need to adjust ILO conventions regarding the protection of expectant mothers and youths. However, there were some intentions to change the complete sense of the law by eliminating certain benefits for employing or firing workers.


Limited Liability Company


Part of a Foreign Company


General Partnership




Limited Partnership









43,700 Tax Rates 17%, 7% and 0%

Value Added Tax Corporate profit tax


Personal income tax


Source: Commercial Court

Economy Statistics According to the present law, an employee can be engaged on either a fixed term or open ended contract. Most companies prefer to engage employees for a fixed term due to the rigidity of the law in the area of terminating employment. The new proposal is to eliminate this element and to introduce a simple labor contract with no fixed period. This would put more rigidity into the labor market and would lead to an increase in grey economy in the labor market. Hopefully, this will not happen as the business sector is pressuring the government to retain the current regulations regarding the Labor Law.


During the last quarter of 2010, changes were also made to the Law on Pensions and Invalid Care, primarily in the area of increasing the age of retirement to 67 years (both for men and women). This will happen gradually over a period of time until 2042. These changes are being made in order to eliminate problems that have occurred in the pension fund. The ratio between pensioners and active employees is really low and thus the whole system is endangered. In order to avoid this problem, it has been proposed that the retirement age should be increased and that was accepted by the Parliament.


The last quarter was characterized by changes in the system for calculation the minimum wage. Instead of the previous level of €55, the new minimum wage will be around €150, calculated according to the poverty rate in Montenegro. The new system for calculating wages and minimum wages will be described in the following issue of MBO.

Selected indicators Population Real GDP (billion) Real GDP growth Inflation rate average XI 2009/2008 XI 2010/ 2009 Unemployment rate IX 2010 II 2011 Net FDI (million) 2009/2010*



625,082 2.980







10.95% 12.41%



*Montenegrin Investment Promotion Agency (MIPA) Official currency


Source: Ministry of Finance, Central Bank of Montenegro, Monstat


Business Environment Macroeconomic Outlook Capital Markets Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up...

Macroeconomic Outlook GDP According to estimations made by the Central Bank of Montenegro, the Montenegrin GDP in 2010 amounted to €3.025 million, recording a growth rate at a level of 0.5%. This data indicates that the Montenegrin economy has come out of its phase of recession. Graphic 1. GDP in current prices - in mil € 12.0%

10.7% 3,085.6 8.6%




8.0% 6.9%



Foreign Direct Investments (FDI)

4.0% 0.5%

Foreign Direct Investments (FDI) in 2010 were higher for 1.01% in comparison to 2008, and lower for 54.62% in relation to 2009. However, if we exempt the part related to the trade of shares of State Power Company (EPCG) made by company A2A, which amounted €436 milion, the FDI in 2010 recorded the incrise of 9,14% in comparison to 2009. Bearing in mind specificity of share trade of company EPCG, with exception of 2009, FDI recorded a constant growth starting from 2005. According to projections of Montenegrin Investment Agency (MIPA), FDI will range between €660 and €730 million in 2011 with probability of 75 - 80%. Although the first quarter gave hint more significant fall of FDI in 2010, the other three quarters recorded the trend of their intensifying. Data show that FDI fully amortized “delayed effect” of the financial crisis in the Montenegro, so that we can speak about investment recovery in Montenegro. However, this positive trend of FDI should not misleade us. The amount of FDI in 2011 to great extent is related to privatization projects and spatial plans which allow Greenfield investments. In the moment of preparation of this report, Plan of privatization for 2011 has not been adopted. Situation is similar with large number of urban spatial plans. Source: Montenegrin Investment Promotion Agency (MIPA)

Source: Monstat


2.0% 0.0% -2.0%


-4.0% -6.0%




GDP in current prices - in mil €



Real growth rate

Source: Central Bank of Monetenegro

Budget According to preliminary data from the Ministry of Finance, budget revenue and state funds amounted to €1,369.16 million in 2010. The primarly revenue ammounted to €1,138.62 decreasing by 2.25 % in comparision with its planned value. In the current revenue structure, during the observed period , tax based revenue represented the main share, totaling €1,055.56 million, whilst non-tax based revenue amounted to €83.07 million. In the structure of tax based revenue, taxes totaled €675.80 million, and contributions totaled €379.76 million. In the structure of non- tax based revenue, duties totaled €20.54 million, fees totaled €27.43 million, receipts from the repayment of loans totaled €3.62 million, and other revenue fees totaled €31.48 million. Graphic 2. Budget revenue and State Funds structure 2.6% 0.3% 2.5% 1.9%

Taxes Contributions


Duties Fees

Industrial Production Industrial production in December 2010 recorded a growth of 56 % in comparison with the average level of 2009. Consequently, during the period January-December 2010, an increase of 17.5 % was recorded when compared with the same period previous year. During the observed period, the electricity, gas and water sectors recorded an increase of 144.6 % in comparison with average level of 2009. The mining and quarrying industries increased by 26.6 %, and the manufacturing industry sector recorded an increase of 10.4 %.


Other revenues 60.5%

Receipts from the repayment of loans

Source: The Ministry of Finance

Inflation Inflation, as measured by the Consumer Price Index (CPI), in December 2010, recorded a rise of 1.1% in comparison with average level of 2009. When observing the average CPI structure for respective goods and services during the 2010,

and in comparison with the average level recorded in previous year, there were certain variations, particulary in transport services which recorded a growth of 10.7 % and also in expenditure on rent payments which was 7 % lower. Graphic 3. CPI-monthly growth rate Dec-10

1.2 Nov-10 Oct-10

1.0 0.8 Apr-10

0.6 0.4 0.2 0.0


May-10 Aug-10 Sept-10

Dec-09 July-10 Jan-10 Feb-10



Source: Monstat

Employment and Wages According to data provided by the Employment Agency of Montenegro, the unemployment level recorded at the end of December was 32,026 (of which 14,358 were women), thus showing an unemployment level of 12.13%. Since the beginning of the year, it has been recorded that there are 18,893 newly employed persons and that 14,596 working permits, for non-resident workers, have been issued. The average salary, without taxes and contributions, was €480 in November 2010. This represents a rise of 3% in comparison with the average salary recorded in 2010. Average salaries, without taxes and contributions, ranged from €104, recorded in the fishery sector, to €956, recorded in the financial mediation sector. Source: Monstat, The Employment Agency of Montenegro

February 2011

Banking Sector Total Bank Assets and Liabilities In October 2010, in the overall assets structure, net loans accounted for the main share,71.2%. This was followed by monetary assets and deposits with depository institutions at 19.8%. Other bank assets accounted for 7.0%, while other assets accounted for the remaining 2.0%.The month-on- month increase recorded monetary assets and deposits with depository institutions (3.2%), loan loss provisions (0.1%), other assets (3.1%) and provisions for assets other than loans (0.9%). In September, when compared with August 2010, an increase was recorded in the following areas: loan loss provisions (2.8%), financial derivatives (33.3%), securities (3.2%), custody operations (4.3%), and provisions for assets other than loans (1.8%). For the same period, in the area of bank liabilities, deposits accounted for the main share of 61.2%, followed by borrowings at 23.9% and total bank capital at 10.1%. The remaining 4.8% were other miscellaneous liabilities. Deposits, borrowings and other liabilities recorded monthly increases, respectively, of 0.2%, 1.1%, and 0.6%. In September, when compared with August, all entries showed a downward trend. Total bank capital amounted to â‚Ź295.2 million at end-October 2010, â‚Ź296.9 million at end-September 2010 and â‚Ź307.6 million at end-August this year.

Deposits Time deposits accounted for the main share of total deposits, around 60.0%. The structure of time deposits shows that deposits with a maturity period ranging from 3 months to 1 year accounted for the main share. This ranged from 29.3% in August to 34.5% in October. Deposits with a maturity period of less than 3 months represented the following percentages of the total share:19.0% - August, 15.1% - September, 13.7% - October. Observed on a sector by sector basis, household deposits still account for the main share of total deposits,50.0%. Graphic 4. Structure of deposits by sectors, period-end, in % 41.4% 40.4% 40.3%

Demand deposits Time deoisits 18.0% 15.1% 13.7%

Up to 3 months From 3 months up to 1 year From 1 to 3 year 1.5% 1.7% 1.8%

Over 3 years

9.8% 10.2% 9.7%


8.8% 7.1% 6.7%

Financial institutions Non-financial institutions General Government

58.6% 59.6% 59.7%

29.3% 32.6% 34.5%

34.8% 33.4% 33.2% 6.5% 6.9% 7.0% 48.5% 51.2% 51.7%

Households 1.3% 1.3% 1.2% 0.1% 0.1% 0.2%

Non-profitable organisations Other

20 VIII 10

Graphic 5. Structure of deposits, period-end, in %

IX 10




X 10

20 VIII 10

40 IX 10


X 10

Source: Bulletin of Central Bank of Montenegro (November 2010, October 2010, September 2010)

Household Deposits Regarding the maturity structure of household deposits, the main share of 67.0% was made up of time deposits (67.5% - October, 67.0% - September, 67.0% August), whereas demand deposits made up the remaining 32.5% at end-October, 33.0% at end-September and the same again in August.

Loans The loan/deposits ratio amounted to 1.26 in October this year, thus slightly improving in comparison with the previous month (1.27). In September, the loans/deposits ratio improved in comparison with August (1.22). The loans/deposits-plus-borrowings ratio amounted to 0.908 at end-October this year, thus showing an improvement in relation to the previous month when it was 0.916. The loans/deposits-plus-borrowings ratio amounted to 0.892 at end-August. Within the structure of total disbursed loans, corporate and household loans accounted for the main share of 94.0%, whereas the remaining 6.0% was a combination of loans granted to banks, other financial institutions, public owned organizations, nonprofitable organizations and others. Table 1. Lending interest rates, period-end, in % Lending interest rates

Household loans

Loans granted to legal persons


IX 10

X 10


IX 10

X 10

Average nominal lending interest rate







Average lending effective interest rate







Business Environment Macroeconomic Outlook Capital Markets Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up... Guidelines for Implementing Central Bank Policy During 2011 In order to preserve the stability of the banking system as a key element in the financial sector, and in order to maintain financial stability, the Central Bank of Montenegro will strengthen its role in monitoring and supervision. It will, on a continuous basis, adjust the regulatory framework to meet EU regulations and will continue to implement international accounting standards and business principles in this area. The guidelines for carrying out the Central Bank policy for 2011 state that it will promote the strengthening of corporate governance and will strengthen risk management in banks. It was announced that stress testing will be carried out periodically to verify the exposure of banks to risk and to determine any additional needs in the areas of capital or liquidity. The Central Bank of Montenegro will promote the concept of looking ahead during reservations and will implement policies that enhance capital protection. This should significantly increase the resilience of the banking sector to external shocks. Also, according to its guidelines, the Central Bank of Montenegro will introduce a cautious licensing policy and will authorize new shareholders to join the existing banking system on the basis of protecting the interests of bank depositors and creditors. In addition, to enable further cooperation with other countries, an increased level of supervision of banks in Montenegro will be required. This will be achieved through the planning of joint controls and though the exchange data and information in accordance with the signed Memorandum of Cooperation and Exchange of Information. Memorandum on cooperation in the field of banking supervision CBM has so far signed with the Central banks and supervisors of Slovenia, Serbia, Albania, Macedonia, France, Hungary, Croatia, Bosnia, Russia, Greece, Bulgaria and Cyprus.


Business Environment Macroeconomic Outlook Capital Markets Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up...

Privatization and Investments Together for the Development of Bjelasica The Ministry of Sustainable Development and Tourism and the Ministry of Finance, together with the municipalities Kolašin, Andrijevica, Mojkovac, Berane and Plav, will exchange development plans for the region of Bjelasica and Komovi. The plans could then soon be passed on to the Government for adoption. Within the next few weeks, a proposal for development will be prepared and coordinated by government and municipality representatives. By forming one single company or similar type of organization, will enable more efficient and qualitative contact with investors.

Montenegro Plans to Issue Eurobonds in the First Half of the Year Montenegro plans to issue a new set of Eurobonds during the first half of 2011. This follows last year’s successful initial placement of €200 million ($266 million) debt paper – announced Finance Minister Milorad Katnić. The country budget for this year allows for borrowing of up to €180 million, while an additional €53 has been foreseen for infrastructure projects. The preparation phase for the issue of Eurobonds has already started and the government is now in the process of selecting financial institutions to act as advisors in the process. The issue of Eurobonds has several positive elements. Firstly, the country is presented to a great number of investors through the process.

A Renewable Energy System Around the Globe by 2050 The Energy Report that was published by Ecofys, WWF and AMO is a comprehensive study claiming that the world can be 100% reliant on renewable energy by 2050. It demonstrates the feasibility of such ambitions across the whole planet.A fully sustainable and renewable global energy system is possible by 2050. The report proposes to address the urgent problems caused by looming climate change. The world’s energy needs could be met entirely by renewable sources. For several reasons, the world will need an adapted energy system to accommodate its growing population. Climate change, depletion of natural resources and a growing dependence on only a few energy suppliers are a threat to our current system. Renewable sources such as solar energy, wind, hydro and bioenergy are necessary for a sustainable balance. Source:


IFC Helps Finance Highway Bypass in Podgorica IFC, a member of the World Bank Group, is lending about €10 million to Montenegro’s capital city, Podgorica, to help complete a bypass highway that will eliminate traffic bottlenecks on the road leading to the Adriatic Sea. The new highway will enable easier access by tourists to the Adriatic coast, and will contribute to the country’s reintegration into international trade networks. The total cost of the project is about €30 million. IFC’s long-term financing reflects its strategic focus on enabling investment in municipal infrastructure within the region. The European Union has recognized the project as a regional priority and has provided a grant of €4 million for its completion. Podgorica is the capital of Montenegro and also its largest city. It has a population of around 200,000. Podgorica is also the administrative, financial, telecommunications, and university center of the country. It has a strong economic base focused on the aluminum, construction, and tourism sector.

EBRD lends Montenegro €35 million to Upgrade Power Network The European Bank for Reconstruction and Development has said that it will lend Montenegro €35 million ($46.7 million) to upgrade its power distribution network. Montenegro’s power company, Elektroprivreda Crne Gore AD (EPCG), is 43.7 percent owned by the Italian company A2A. It will use the money it receives to buy and install 175,000 “smart electricity meters throughout the grid.” EPCG, whose share majority is owned by the government, is struggling with a high level of losses in the distribution network and a low collection rate.” New meters will mark the start of the transformation of EPCG’s network into a modern, smart power grid which will lead to the reduction of CO2 emissions by approximately 88,000 tons a year.

February 2011

Investments cont. The World Bank Finances the Construction of a Sanitary Landfill Site, Možura, in Montenegro The government of Montenegro and the World Bank signed a loan agreement which provides €4.5 million for the design and construction of the Možura domestic landfill site and the necessary equipment for its operation. The Možura domestic landfill site will be designed to collect waste from the municipalities of Bar and Ulcinj for the next 28 years. This loan agreement represents additional financing for the Montenegro Environmentally Sensitive Tourist Areas Project (MESTAP), which was approved by the World Bank’s Board of Directors in September 2003 to the amount of US$7 million. Additional financing for the project was approved by the World Bank’s Board of Directors on December 20th, 2010. The activities of the project will help to protect Montenegro’s beautiful costal area from threats posed by pollution from inadequate solid-waste collection and disposal systems. Additionally, having recently been granted candidate status for EU membership, the government of Montenegro has committed itself to the harmonization of its environmental standards with those prevailing in the EU. The selected landfill site is located at Možura in the Municipality of Bar, 17 km southeast of the city of Bar and 11 km northwest of the city of Ulcinj. The financing instrument would be an IBRD loan, repayable in ten years’ time, and would include a grace period of four years.

Montenegro Plans to Obtain a Loan Finance Improvements in the Treatment Infrastructure of its Water Supply

to and

The government of Montenegro will sign a loan agreement with the European Bank for Reconstruction and Development for the amount of up to €5.35 million. This loan will enable the Public Utility Company in Danilovgrad, a company fully owned by the municipality, to finance improvements in the infrastructure of the water supply, and also to develop the collection and treatment of wastewater in Danilovgrad. Although the company is managed adequately, a number of operational problems still exist: (i) high levels of technical losses due to prolonged underinvestment in the water supply infrastructure. (ii) high energy and maintenance costs for the water supply due to the poor physical condition of the water supply pipes (iii) urgent need for the rehabilitation of the

water supply and the construction of wastewater collection and treatment facilities. The existing company will be split into two new companies: 1) water and waste water company and 2) solid waste and other utility services by mid 2011. The overall objective of the assignment is to improve the company’s operational efficiency and financial management in order to improve and strengthen its capacity to provide high quality water and adequate sewage services.

British Cubus Lux and Spanish Sol Melia €250 million in Valdanos


The Privatization Council gave the green light to begin the realization of one of the largest projects on the Montenegrin coast - the assignation of the long-term lease at Valdanos bay, with the option to extend for a further thirty years. The so-called ‘Ulcinj Pearl’ will be transferred to the British company Cubus Lux, which will build a 5-star hotel. The complex will, according to initial estimates, be worth around €250 million, and the construction of new facilities will require the employment of 1,000 workers. From an environmental point of view it is important that none of the olive tree in Valdanos are cut down and that an anti-fire protection system with hydrants is set in place.

EBRD to Lend €37 Million for the Completion of a Tourist Resort Complex at Sveti Stefan The European Bank for Reconstruction and Development has agreed to lend €37 million to help complete Montenegro’s most famous tourist resort complex at Sveti Stefan. The Greek-based shipping company Restis Group joined forces with the elite boutique hotel chain, Amanresorts, in 2009 to develop the complex whose redevelopment has moved slowly in recent years. Adriatic Properties, which is owned by Restis, is developing the resort. Amanresorts closed the Sveti Stefan island hotel in 2007 for renovation after winning a 30-year lease. It opened part of the famous hotel connected to the mainland via a land bridge earlier in 2010. Most of the EBRD funds will go toward developing a part of the complex on the mainland known as the Queen’s Beach Hotel.


Tenders Four Bids for the Tender for the Lease Storehouse “Rakite” in Herceg Novi

of the

A public invitation has been released for participation in a tender process, through the submission of bids, for the lease of the motor fuel storehouse “Rakite” - Lustica, Herceg Novi. The subject of the tender is the lease of a motor fuel storehouse with an accompanying quay, ‘’Rakite’’ in Luštica, Herceg Novi. Four bidders delivered their bids: Jugopetrol AD Kotor, Adriatic Marinas doo Tivat, Vektra Montenegro doo Podgorica and one natural person Mr. Dušan Radović from Herceg Novi. The Tender Commission will review the bids within defined terms.

Onogošt: Sixth Attempt for Privatization Failed There were no bids delivered for the tender to sell part of the property of a Nikšićbased hotel-tourism company, “Onogošt”. The “Onogošt” company went bankrupt in November 2009 upon the request of Privatization Fund HLT. It had assumed the right to manage the majority package of shares in 2005. The bankruptcy committee called for the sale of part of the property in order to meet the company‘s debts which amounted to €4 million.

The Chinese gave up on HPP on the Morača, Italian companies are in the final phase The Chinese corporation Sinohydro, abandoned their plans to build a hydro power plants on the river Moraca. This was confirmed by the Montenegrin Ministry of Economy. However the corporations Italian Enel and A2A in a consortium with the Montenegrin Power Company (EPCG) are still in the running for the project. Before the Chinese gave up, the Austrian company Strabah also gave up on the project. The Chinese company reported that they were no longer interested in this particular project, but that they were still interested in some other projects in Montenegro. The tender invitation to build a hydroelectric power station will remain open until April 2011, and the best bid will be selected by May 7th, 2011.

The Government Expects €112 Million Privatization


In the last call, the sixth since last year, bids were put forward to sell the hotel “Trebjesa” in NIkšić and the café “Šavnik” in Šavnik. The starting price for “Trebjesa” was half a million euros, while the café was offered for sale at €16, 000. Associated land was also offered with both properties.

The Government of Montenegro headed by Prime Minister Igor Lukšić plans to take in about €112 million in the budget from privatisation – says the Economic - Fiscal program for 2011. The largest share of this amount is expected to be realized from the privatisation of Ulcinjska rivijera (€22.3m), Port of Bar (€21.75m), Container Terminal (€20.4m) and the Institute Simo Milosevic (€ 16.8m). The state plans an income of €8.9million from the privatisation of Montecargo, €11.6million from the shipyard Bijela and €4.5million from Barska plovidba. The sale of Pobjeda should bring €3.2m, and Željeznički prevoz (Maintenance department) should bring around €13.7million.

Contract Terminated by Atlas Group

Consortium Headed

Aktor Informed of the Annulment of the Tender Process, Negotiations Started with the Chinese

Having regard that the Tender Commission in the tender procedure for the purchase of 75,0557% of shares of the company Montepranzobokaprodukt Tivat has failed to reach the agreement on the Contract, in accordance with the Tender conditions, the Privatization Council decided to abort negotiations with second-rated bidder Consortium headed by Atlas Group and pronounced the tender unsuccessful. The tender procedure will be re-invited in this year.

The Government of Montenegro adopted the decision, taken by the council for the construction of the highway Bar-Boljare, to annul the tender for the selection of a developer and concessioner for the highway. The letter of termination concerning previous business was sent to Greek Aktor. This created new conditions to enable the commencement of negotiations with the Chinese. Initial contact has already been made. If the negotiations are successful, work on the construction of the highway could start in spring.



February 2011

Economic Freedom of the World In the 2011 ‘Economic Freedom of the World’ report, published by the Heritage Foundation and the Wall Street Journal, Montenegro’s economic freedom score is 62.5, making its economy the 76th freest out of 179 countries. Its score has decreased by 1.1 points since last year, primarily because of an explosion of growth in government spending. Montenegro ranks as 34 out of 43 countries in Europe, and its overall score is above average in the world. The following are opinions produced in the report regarding different components of the Index of Economic Freedom. Business freedom (ranked 66th). Procedures for setting up a business have been streamlined and the number of licensing requirements has been reduced. The application of regulations is sometimes inconsistent and non-transparent. Trade freedom (ranked 53rd). Montenegro’s weighted average tariff rate was 3.2 percent in 2009. Progress has been made in liberalizing the trade regime as Montenegro has worked toward joining the World Trade Organization. However, some high tariffs, import restrictions, non-transparent standards and regulations, and corruption add to the cost of trade. Ten points were deducted from Montenegro’s trade freedom score to account for non-tariff barriers. Fiscal freedom (ranked 24th). Montenegro enjoys competitive flat tax rates. The flat individual income tax rate was reduced from 12 percent to 9 percent in January 2010. The corporate tax rate is a flat 9 percent, levied at state level. Other taxes include value-added tax (VAT), inheritance tax, and property tax. Excise taxes on cigarettes and oil were increased in 2009. During the most recent year, overall tax revenue, as a percentage of GDP, was 30 percent. Government spending (ranked 160th). During the most recent year, total government expenditure, including consumption and transfer payments, rose to 48.8 percent of GDP. Though this has recently stalled, privatization has advanced. The structural deficit now measures 6 percent of GDP, and public debt has risen to 38.8 percent of GDP. Monetary freedom (ranked 82nd). Inflation has dropped, averaging 4.9 percent between 2007 and 2009. It declined further in 2010. State subsidies and price supports have been eliminated for most goods, and most prices are determined by market forces. However, the government influences a few prices through state-owned enterprises and regulates utility, energy, and transportation prices. Ten points were deducted from Montenegro’s monetary freedom score to account for measures that distort domestic prices. Investment freedom (ranked 75th). Foreign and domestic investors are treated equally. Montenegro allows profit repatriation and guarantees against expropriation. However, the business, legal, and regulatory environment is still in transition, and bureaucracy can be non-transparent, burdensome, and prone to corruption. The implementation and enforcement of regulations and laws can be problematic. Residents and nonresidents may hold foreign exchange accounts, and payments, capital transactions, and transfers are subject to few restrictions.

Business Environment Macroeconomic Outlook Capital Markets Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up...

Foreign investors may purchase land, but there are some reciprocity-based restrictions. Financial freedom (ranked 70th). Montenegro’s financial sector, though small and underdeveloped, is becoming more competitive. The financial system has been using the euro as legal tender since 2002. Access to financing has gradually increased, and banking is completely privatized. There are 11 banks, two of which are locally owned while the other nine are part of international banks. Participation by foreign banks and investment are significant. Despite growing competition, credit prices remain fairly high. The non-banking financial sector, including insurance and reinsurance, remains underdeveloped. The securities sector is small but is developing. In response to the global financial turmoil, the government has introduced several measures that include a one-year blanket deposit guarantee to slow down deposit withdrawals. Non-performing loans have risen. Property rights (ranked 73rd). The constitution provides for an independent judiciary, but the system is inefficient, and judges are poorly trained. Sales of pirated DVDs, CDs, and software along with the sale of counterfeit trademarked goods are fairly widespread. Montenegro is ranked 80th out of 125 countries in the 2010 International Property Rights Index. Freedom from corruption (ranked 79th). Corruption is perceived as significant. Montenegro ranks 69th out of 180 countries in Transparency International’s Corruption Perceptions Index for 2009, an improvement from 2008. A widespread perception of government corruption remains, however, particularly in the executive and judicial branches and especially with regard to the privatization of state-owned firms. Conflict-of-interest legislation requiring the disclosure of government officials’ salaries and property has not been fully implemented, and many officials refuse to comply. Organized crime, especially the smuggling of gasoline and cigarettes, is well established. Over the past two years, legislation has been introduced in the areas of public procurement, the treasury, the budgetary system, and the courts. This has been enacted to combat corruption. The implementation of these laws is now a priority. Labor freedom (ranked 4th). Montenegro has taken steps to enhance flexibility in the labor market. A labor law passed in mid-2008 still contains employment protection that discourages the dynamic creation of jobs. Severance payments still remain too generous to encourage job creation and longer-term employment contracts.

1. Report published by the Heritage foundation and Wall Street Journal 2.


MBO Interview 1. Since 2009 was quite challenging due to the financial crisis. To which extent and in which manner it influenced UNDP work globally?

Mr. Alexander Avanessov, UN Resident Coordinator and UNDP Resident Representative to Montenegro Mr. Alexander Avanessov has been UN Resident Coordinator and UNDP Resident Representative to Montenegro since 4th July, 2008. Prior to his appointment in Montenegro, he served as Deputy Resident Representative at the UNDP in Armenia from September 2004 to June 2008. He also served from 1994 to 2004 as Regional Program Manager and Program Specialist at the UNDP Regional Bureau for Europe and the CIS, and as Senior Regional Adviser at the UNDP Country Office in Russia. Mr. Avanessov was awarded a Master’s Degree and a Doctorate in International Economic Relations at the Moscow State Institute of International Relations, Russia. He continued at the Moscow State Institute of Foreign Affairs as an assistant professor, lecturing on the Economy of Japan and the Economic Geography of the USSR. Between 1984 and 1986 Mr. Avanessov served as Second Secretary at the Ministry of Foreign Affairs, Department of International Economic Organizations. Here, he contributed to the formulation and promotion of several key initiatives that were taken up by the USSR in various UN bodies. Between 1986 and 1994 he worked at the Russian Mission to the United Nations, Department of UN Economic Agencies as First Secretary.


The global crisis has put at risk many hard won developmental gains in many parts of the world and has resulted in the loss of 30 million jobs worldwide as well as creating tremendous problems for many people, particularly vulnerable groups. For an organization like UNDP it has meant that we have had to become even more programmatically focused, cost-effective and coordinate more effectively our efforts with our development partners and major stakeholders. During this period we have initiated various interventions to help governments to respond effectively to the crisis, thus increasing the resilience of states in dealing with external shocks and move forward with their developmental strategies. We have also done this in Montenegro, where our activities have included analyses of the impact of the crisis, policy advice, stimulation of employment and entrepreneurship. At a global level, the UN system, including UNDP, actively participates in discussions within various international forums, including G8 and G20, advocating for development cooperation to achieve the Millennium Development Goals.

2. In October 2009, UNDP Montenegro launched National Human Development Report 2009 recommending measures to make Montenegro become the Society for All. As we know, the global financial crisis has caused a severe downturn in the Montenegrin economy; GDP growth was estimated at between -5% and -6% in 2009. In the coming years the economy is expected to pick up during the next few years. However, macroeconomic stability and structural issues (as emphasized by prime minister Luksic in his inaugural address), such as competitiveness of local economies, promotion of small and medium enterprises, social development, anticorruption, development of local economies, and enhancement of the educational system, science and technology, will all feature strongly in the national agenda. I believe that this approach, with high attention to the problems of vulnerable groups such as persons with disabilities, the RAE population and the unemployed, will make Montenegro more resilient to the crisis and ensure more sustained progress in human development and the attainment of national MDG targets. As expressed by UNDP administrator, Helen Clark, the latest global economic crisis reminds us of how vulnerable countries can be to external shocks. This is very relevant to Montenegro which has been so far quite dependent on the external factors, including FDIs or situation in the aluminium market. Unfortunately, as you can see from the recent analysis of the UN report on world economic prospects in 20112012, the global economic growth is anticipated to be weak. This underlines the importance of focusing on internal factors concerning economic growth in the country, based on its growing competitiveness. Let me mention, in this regard,

the enormous potential of Montenegro (very much untapped especially in the Northern part) for eco-tourism and green economy.

3. What kind of capacities you believe are the most important having in mind current economic situation especially at Western Balkans and in Montenegro? As you are aware, the development of national capacities is a key overarching component of the UNDP mandate. It is impossible to overestimate the importance of this work in Montenegro, especially now when the country is going through a very intensive EU accession process. I believe that capacity building starts from knowledge building, which includes also learning from international experience. I agree with the point of view expressed in the monograph belonging to the Academy of Science in Montenegro entitled ‘Montenegro in the XXI century’. It states that in an era of competitiveness, “in the process of building a knowledgeable society, not only will a higher level of education of the population be necessary, but also a greater level of integration into the world will be required”. In this regard, the UN system is a unique hub and a custodian of knowledge regarding various aspects of development. In the context of Montenegro, we are introducing this knowledge and best practices through the UN Integrated Programme and through agency specific country programmes and interventions of UNICEF, UNDP, UNHCR, and many specialized agencies such as UNIDO, FAO, ILO, WHO and UNESCO. In Montenegro UNDP has developed a comprehensive capacity development program to assess the capacity of many governmental institutions, both at central and local level. I should mention that in fact all UNDP projects have a capacity development component. Over the coming years, some of the main priorities will concern capacity development in such areas as adaptation and mitigation of climate change, sustainable development, preparation for the Rio summit in 2012 and celebration of the 20th anniversary of the proclamation of Montenegro as an eco-state, disaster risk reduction, support to civil society organizations, local administration and private-public partnerships, among others.

4. Montenegro ranks 49th on the index, with a Human Development Index (HDI) value of 0.769, out of a total 169 countries. This ranking places Montenegro in the “high human development” category and ahead of all countries of former Yugoslavia except Slovenia, which ranks 29th and hence falls into the category of “very high human development”. Do you think we should be pleased with those results? I think that Montenegro should be proud of the progress it has achieved since gaining its independence. The country is now in the upper group, in terms of the human development index, which is an aggregate measure that gauges the situation in three areas: long and healthy life, access to knowledge, a decent standard of living.

February 2011

However, this should not be the reason to relax. A lot remains to be done to ensure further human development progress and the highest standard of living possible in Montenegro. While Montenegro can be considered an “MDG Plus” country (that has actually achieved its targets regarding child mortality, HIV and maternal health), a number of gains have been jeopardized by the economic crisis in 2009. The poverty level rose from 4.9% in 2008 to 6.8% in 2009. This had, and will have, a delayed negative impact on existing regional disparities, and the situation of vulnerable groups. I think that the main task now is to try to preserve the progress that has been achieved so far and enhance the resilience of the country to crisis, thus ensuring stable economic growth, which, along with furthering the progress of democratic institutions, health and education, should guarantee every person living in Montenegro the opportunity to realize his/or her potential.

5. Could you name the most successful projects UNDP implemented in 2010? What where the visible results of those actions? I believe that the best UNDP project is still ahead of us, but in terms of impact there are several which I might single out. For example, the project ‘Demilitarization of Montenegro’ (MONDEM) has had a direct impact on improving the security of people. Hazardous toxic materials left on the shores of the country’s spectacular Bay of Kotor, have now been disposed of. Also the ‘Capacity Development Programme’ (CDP), mentioned before, brought critical knowledge and experience to quite a number of national institutions, including support to the Ministry of Foreign Affairs and European Integration in organizing the Summer School for Young Diplomats named after the first Montenegrin Minister of Foreign Affairs Gavro Vukovic – a regional initiative led by Minister of Foreign Affairs Mr. Rocen. This initiative attracts more and more interest beyond the region, with great participation of almost the entire diplomatic core in Montenegro. I would also mention our project in support of access to justice for the poor where UNDP, together with the Ministry of Justice of Montenegro, enhanced the reform of legal aid and the mediation system. Our pilot project aimed at limiting the effect of the economic crisis in the north of Montenegro brought to life 12 new businesses and proved that the families could safeguard their living even in very difficult economic situation if provided with rather decent, but well targeted financial and technical support. Additionally, priority was given to ideas pertaining to “green” jobs which could be linked with local tourism initiatives – supplying local hotels or businesses, for instance. The empowerment of women was also promoted through special support to female entrepreneurs.

It has been very important, as part of a threeyear environmental project to repair sites that were once blighted by industrial pollution in the Western Balkans. UNDP coordinated a cleanup of the tailing pond in Mojkovac, a toxic shadow remaining from a closed lead and zinc mine. What was once a threat to human health is now being reinvented as an eco-tourism hub. Investment barriers are being removed to allow productive public use of the dump’s prime location. To make the most of the reclaimed site, Mojkovac is planning to build a vast sport and recreation ground which will extend from both banks of the Tara, and will be based on winning designs from an international competition.

6. How do you see cooperation between UNDP and Government of Montenegro in incoming period? We are currently making good progress with the ongoing 2007-2011 UNDP country programme. Our recent strategic review with the government showed that our approach, during this period, and our plans for the next programming cycle 2012-2016, correspond fully with the Montenegro’s priorities. This was also reconfirmed during discussions with the UNDP administrator Helen Clark and country leaders in September 2010. Our program supports Montenegro’s key strategic goal to become a member of the European Union and assist in achieving many development goals and international obligations. In addition to the above mentioned interventions I would like to mention some projects that we have supported and successfully completed during this period, together with national institutions and with support from donor partners. Firstly, the 2009 National Human Development Report on Social Inclusion along with the analysis and data obtained from the First National Communication on Climate Change - both have been used extensively in policy and decision making; new strategies now exist for regional development, the informal management of the settlement of protected areas, and the reform of public administration; capacity building has been implemented in the Ministries of Finance, Justice, Health, Environment and Spatial Planning, European Integration, and Foreign Affairs; a third year of study in the Academic Gender Studies course was supported, and a new project funded by the EU on gender equality has just been signed. Public-private partnerships have been sought under the Global Compact model that was inaugurated with 21 companies in November 2010. This is one way of encouraging the growth of a community which demonstrates corporate social responsibility in Montenegro. We are very glad to see that the government is beginning to tackle emerging issues regarding the mitigation of climate change and the adaptation and efficiency of energy.

7. How do you see the future activities of UNDP in Montenegro? What are your main goals? The future Country Programme for 20122016 which is being consulted now with the Government will address the key national priorities including those identified within the strategy for EU accession and various other sector based strategies and development plans, such as Regional Development Strategy or Public Administration Reform agenda. The overall aim of the programme is to strengthen human and institutional capacity in Montenegro, to implement legal, policy and public administrative reform, to improve the country’s ability to provide services, to ensure the protection of the most vulnerable elements of society and to promote employment and environmentally conscious, equitable growth. Key priorities, which in many respects echo those of the EU accession process, where we will closely work with the Ministry of Foreign Affairs and European Integration, will be focused on such areas as: public administration and judiciary reform; the capacity development of key ministries and local administration; the inclusion and protection of vulnerable populations; the realization of transforming Montenegro into an eco-state; an emphasis on climate change; the reduction of disaster risk; the improvement of energy efficiency; the remediation of environmental hot spots; the introduction of sustainable tourism as a means of local development; the development of strong partnerships with civil society and NGOs, all of which are important and active participants in our many projects. Let me also mention our joint work the Ministry of Social Affairs and Labour and the European Delegation on the reform of the welfare system, where special attention will be paid to vulnerable individuals and social groups who are at risk of exclusion, such as the Roma, the long term unemployed, people with disabilities, pensioners, and those residing in remote, rural areas. We will carry out several strategically important projects in the area of adaptation to and mitigating climate change and in the promotion of ecotourism and a green economy as a means of local development in cooperation with the Ministry of Sustainable Development and Tourism. Policy advice regarding the implementation and introduction of public administrative reforms, anti-corruption institutions, and capacity development in local administration, inter-municipal cooperation and demilitarization will be the focus of our work in the area of democratic governance. All our work will be implemented within the framework of the UN integrated programme, and in close coordination and collaboration with our international development partners, the civil society and a socially responsible business community.


Business Environment Macroeconomic Outlook Capital Markets Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up... Graphic 6. Turnover structure 25.3%

Montenegrin Stock Exchange in 2011 The only one and sole stock exchange in Montenegro began to operate in January 2011 after a technical merger with the Nex stock exchange and the Montenegro stock exchange at the end of December 2010. Following this event, the NEX Stock Exchange ceased to exist as a legal entity. The merging of these two stock exchanges will enable increased levels of liquidity and efficiency in the capital markets, and news of this is expected to be received positively by foreign investors.The new stock exchange will use the two indices, MONEKS20 and MONEKSPIF. These have been developed from the former Montenegrin stock market indices. The stock exchange will use BTS software with a creation upgrade. This version of the software supports the FIX protocol which is the international standard for the exchange of information exchange activity . This will provide a reliable connection with all of the other Montenegrin capital markets.




Capital Markets

PIFs units


Graphic 7. Plantaže JSC

Capital Markets in 2010 During 2010, the total volume of trade carried out in both of the Montenegrin stock exchanges amounted to €58.8 million, which was almost seven times less than the volume of trade that was seen during 2009 (€404.8 million). During 2010, a total number of 21,069 transactions were completed. Three types of security were traded: company shares, privatization-investment fund shares and bonds. These included: old currency savings bonds, pension fund bonds, indemnity fund bonds and government bonds.




During 2010, the greatest turnover was recorded in the area of company shares (60.2%), followed by various other bonds (25.3%), while the total turnover in investment funds amounted to 14.5%.




Trade on the Stock Exchange

0.0 Dec-09 Jan-10 Mar-10 Apr-10 May-10 Jun-10


Aug-10 Sep-10 Oct-10 Nov-10 Dec-10

Graphic 8. Electric power company JSC 7.0







0.0 Dec-09 Jan-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10

Graphic 9. Crnogorski Telekom JSC

NEX Stock Exchange:

The Montenegro Stock Exchange:

The total volume of trade carried out during 2010 was €23.4 million, whilst the number of transactions reached 5,585. During 2009, trade volume totaled €162.5 million through a total of 18,743 transactions.

The total volume of trade during 2010 amounted to €35.4 million. A total of 15,484 transactions were recorded. Compared with the total volume seen in 2009 (€242.3 million), the level of trade volume that was achieved was almost seven times lower.

Taking into consideration shares from a single company, the highest monthly trade volumes, during 2010, were reached in June when Atlas Mont Bank shares reached a high of €3.3 million as a result of just one transaction and in November when Telekom Montenegro achieved a total of €1.2 million in trade volume through 101 transactions.

The companies which traded the most during the first nine months of 2010 were HTP Primorje AD Tivat, which achieved €3.3 million through 2 transactions in May and Prva Banka Crne Gore that achieved a level of €1.8 million in trade volume as a result of just one transaction in June.

4.0 3.5

Table 2: Trade on the Stock Exchange




1.0 0.5


PIFs units


Volume €


Volume €


Volume €


Volume €


NEX Montenegro









Montenegro SE


















2.0 1.5


0.0 Dec-09 Jan-10 Mar-10 Apr-10 May-10 Jun-10



Aug-10 Sep-10 Oct-10 Nov-10 Dec-10

February 2011

Stock Exchange Indices During 2010, all three indices experienced similar trends: a slight increase followed by small fluctuations until the middle of April when they all started to decrease.

NEX 20

Graphic 10. NEX 20 15,500

The highest value reached by NEX 20 during 2010 was recorded on March 1st at a level of 15,165 points and the lowest value was recorded on June 28th at a level of 12,736 points.


Table 3: Brokerage


Brokers at the Capital Markets


Variations in index value influenced all of the changes shown by the shares represented in this index, especially those belonging to the Electric Power Company and to Telekom Montenegro.

Influences on the value of the index during 2010 resulted in a trend that was evident in all six privatization investment funds.

3M broker - dealer



Bull&Bear broker - dealer




CG broker



Global broker - dealer



Invest banka Montenegro



Marketiva broker - dealer




Holder broker - dealer




Market broker - dealer




MB broker (closed)



Moneta broker - dealer (closed)














Graphic 11. NEX PIF






0 Dec-09

MOSTE The value of the Montenegro Security Exchange, MOSTE, upon which MSE’s 35 most liquid companies are traded, also showed a similar trend to the one outlined as being evident in the previous two indices. The highest value for MOSTE during 2010 was on February 18th, with a total of 624 points, whilst the lowest point recorded was on October 21st with a total of 459 points. The various trends evident in the MOSTE Index were influenced by price fluctuations that were seen in most shares (Plantaze AD Podgorica, Prenos AD Podgorica, Port of Bar AD, etc).

Privatization - Investment Funds on the Stock Exchange The total volume of trade involving PIF shares during 2010 amounted to €7.9 million, which was 17% lower when compared with the figures recorded during 2009 (about €9.5 million in trade volume). In total there were 4,587 transactions which involved a total number of 152.7 million shares taken from all six PIFs.












Graphic 12. MOSTE

Monte Adria broker - dealer



Monte broker



MV broker (suspended)



NK broker



Nove broker



Onyx broker



VIP broker - dealer




Partner broker




PG broker



First Financial Securities broker - dealer



Hypo Alpe Adria Bank



Hipotekarna banka







Source: Nex Stock Exchange, Montenegro Stock Exchange


0 Dec-09



Apr-10 May-10






Nov-10 Dec-10

Graphic 13. Turnover and number of PIFs shares 3,000,000






2,500,000 70,000,000 2,000,000

60,000,000 50,000,000

1,500,000 40,000,000 1,000,000


30,000,000 28,063,173 529,687

The most actively traded shares during this period were HLT, whilst the least traded were MIG shares

Share in the turnover (%)



The value of this index showed a similar trend to NEX 20 during 2010. It reached its highest level on April 22rd with a total of 7,438 points and the lowest point was recorded on December 3rd with a value of 5,300 points.










500,000 14,653,676

10,000,000 6,887,197


0 Atlas Mont



HLT Volume

MIG Shares





Business Environment Macroeconomic Outlook Capital Markets Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up...

Credit Support to Montenegro




WASHINGTON, January 31, 2011 - The World Bank Board of Directors approved a new Country Partnership Strategy (CPS) for Montenegro, providing the framework for the World Bank’s assistance to Montenegro during the period 2011–14. The CPS reflects both Montenegro’s status as an upper middle income country with well-defined development priorities and its overarching policy objective of advancing the process of integration into the European Union (EU). The CPS proposes a lending program of US$215.7 million that aims at supporting Montenegro to address two of its main policy priorities: to strengthen institutions and competitiveness in line with EU accession requirements and improve environmental management, including reducing the costs of environmental problems.

Presentation About the EU Legal Framework As part of the joint project “Strengthening the regulatory and supervisory capacity of financial regulation”, under the IPA program funded by the European Union, a workshop “Preventing money laundering and the financing of terrorism – legal framework and best practice” was organized from 22nd to 25th November 2010. The main purpose of the workshop was to address both the EU and international standards regarding AML/CFT, to examine AML/CFT requirements concerning Montenegrin Law and to discuss, with Montenegrin banks, the practical approaches that could be taken to prevent and detect ML/TF activities in order to ensure a deeper knowledge of how to prevent any potential occurrences. The workshop is just one part of the Montenegrin authorities’ efforts to publicly fight against money laundering.


Business News The Composition of New Government On Wednesday, 29th of December, 2010 Montenegrin Parlament elected a new government leaded by former Deputy Prime Minister and Minister of Finance Mr. Igor Lukšić. The new Government will continue to implement the priorities of the former cabinet. Out of 73 members of the Parliament, 46 voted for the New Government’s program and composition, 25 voted against, while two members declared abstant. In newly formed cabinet Mr. Lukšić chose five new members. The Deputy Prime Minister and the Minister of Justice is Mr. Duško Marković, former Chief of Secret Police and by the end of July 2010, Minister Without Portfolio. Ministry of Finance is now headed by former Mr. Lukšić’s Assistant, Mr. Milorad Katnić, while Mr. Vladimir Kavarić was elected Minister of Economy. The new Minister of Sustainable Development and Tourism is Mr. Predrag Sekulić, Minister of Agriculture and Rural Development is Mr. Tarzan Milošević, while Minister of Science is Mrs. Sanja Vlahovic.

Turks Interested in Željezara Nikšić The news that the Turkish company CVS Makina, the new supplier of equipment for Željezara Nikčić, is interested in increasing the production in Željezara. But the news was not received well by workers or the management. The Turkish company stated that it had no intention of merging Željezara with CVS, even though it would own a small package of shares for Željezara. The director of CVS stated that a contract had been signed with Željezara in 2009.

Tourism Less Affected by the Crisis A great number of countries in Europe recorded positive results in tourism, especially during the period from May to August 2010. A growth rate of 4 percent was recorded in western, central and eastern Europe, of 2 percent in southern and Mediterranean Europe, while northern Europe was the only region to experience a drop – of 3 percent. Positive indicators were also recorded in Montenegro. A considerable increase in the number of foreign tourists was recorded for the first eight, i.e. nine months of 2010, compared with the same period in 2009. The growth of the number of foreign guests amounted to 3.9 percent, i.e. 4.6 percent. They represented 86.7 percent of the total number of arrivals.

More SMEs will be Opened in Montenegro by 2015 The World Bank Board of Directors today approved a new Country Partnership Strategy (CPS) for Montenegro, providing the framework for the World Bank’s assistance to Montenegro during the period 2011–14. The CPS reflects both Montenegro’s status as an upper middle income country with well-defined development priorities and its overarching policy objective of advancing the process of integration into the European Union (EU). The CPS proposes a lending program of US$215.7 million that aims at supporting Montenegro to address two of its main policy priorities: to strengthen institutions and competitiveness in line with EU accession requirements and improve environmental management, including reducing the costs of environmental problems.

February 2011

Real Estate Owners Waiting Buyers from Russia Slovenia and Bulgaria Support Montenegro in European Integration The Minister of Foreign Affairs and the European Integration of Montenegro, Mr. Milan Roćen had a meeting with the Ambassador of Slovenia, Jernej Videtic and the Ambassador of Bulgaria, Maja Dobreva. In the meeting with the Slovenian Ambassador, good bilateral relations of the two countries were confirmed and Slovenia also expressed its readiness to provide concrete help to Montenegro and its institutions during the European integration process. The Ambassador of Bulgaria congratulated Montenegro on receiving candidate status for membership of the EU and pointed out that Bulgaria would also support Montenegro with its efforts on the path to European and Euro-Atlantic integration.

Border Crossing with Serbia will not Change Until October Until September 30th, 2011, citizens of Montenegro and Serbia will be able to cross the border between the two countries the same as they now. However, after that date, new regulations will become effective. This was agreed by the Montenegrin and Serbian Ministers of Internal Affairs. Harmonised regulations with the Ministry of Internal Affairs of Serbia will be valid from September 30th, 2011. According to these regulations, underage citizens will also be able to cross the border between the two countries with only a passport or an identification card.

Montenegrin Electrical Enterprise to Become an Important Exporter Montenegro, which usually has an energy deficit, fulfilled its annual plans for hydropower plants in only a few months in 2010 because of exceptionally favourable hydro energy and great inflows. This means that considerable amounts of electrical energy could have been exported. This is also confirmed by EFT Grupa, the leading supplier of electrical energy in central and south-east Europe and one of the biggest trade partners of the Montenegrin Electrical Enterprise (EPCG).

Building Permits and Permits of Occupancy Online With the objective of increasing transparency, all building permits and permits of occupancy will be available on the website of the Ministry of Sustainable Development and Tourism of Montenegro. All interested parties will be able to find out who the investor is, for which facility a permit has been issued, the numbers of any urban and cadastre parcels, information about the facility, such as purpose, size, number of floors, and any other relevant documentation. In the case of a building permit, it will be possible to see who has prepared the main design project and who has carried out the audit, while in the case of an occupancy permit, it will be possible to see who has carried out any technical controls.


The price of real estate only fell in the north of Montenegro. The fall in prices in Podgorica is symbolic compared with the situation in 2006 and in 2007. Prices on the coast have not decreased at all because owners are waiting for a new wave of buyers from Russia. The price of real estate in Herceg Novi has not changed, which means that a square metre in an apartment costs €1,400 to 3,000, and some apartments even cost as much as €5,000 per square metre.

Good Relations Between China and Montenegro During the first day of the official visit to the All-China National People’s Congress, the delegation of the Committee for International Relations and European Integration of the Parliament of Montenegro met the vice president of the Chinese Congress, who confirmed that the Chinese consistently appreciate the fact that Montenegro supports the politics of a unified China.

Agreement Signed to Implement and put into Action the ‘Week of Savings’ At the beginning of November 2010, the Governor of the Central Bank of Montenegro and representatives from various commercial banks signed an Agreement to implement and put into action the ‘Week of Savings’. Montenegrin banks responded to this invitation from the Central Bank after just week. They were happy to join the action entitled “The First Step towards a Dream Come True” in the ‘Week of Savings’. It was emphasized that encouraging saving would be the only marketing element that the Central Bank would support during the following period, bearing in mind its importance for stability in the banking system and its macroeconomic implications for economic growth. The Central Bank’s initiative, the ‘Week of Saving’ was, as in the previous years, organized in cooperation with Atlasmont Bank, Crnogorska Komercijalna Bank, NLB Montenegro Bank, Prva Bank, Hipotekarna Bank, Hypo-Alpe-Adria Bank, Erste Bank, Invest Bank Montenegro, Podgorička Bank Societe Generale Group, Komercijalna Bank AD Budva and First Financial Bank.

Sweden’s Sweco wins Environmental Contract in Montenegro The Swedish consultancy group, Sweco, said that it has been chosen by the Montenegrin Environment Ministry to improve the ecosystem in and around lake Skadar. The contract is worth over €675,000.


Business Environment Macroeconomic Outlook Capital Markets Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up... Access to larger EU funds enabled Candidate status provided Montenegro with the possibility of making greater use of EU pre-accession funds. This means that it now has the right to use all five IPA components instead of just the two that have previously been used: • Support for transition and institutionbuilding; • Cross-border cooperation. The other three components are aimed at candidate countries only and include: • Regional development; • Human resources development; • Rural development.

In the Spotlight Montenegro Officialy Becomes an EU Candidate Country On Friday, December 17th, 2010, at a two-day summit in Brussels, the European Council backed a recommendation made by the European Commission to grant candidate status to Montenegro. However, this decision does not guarantee an easy journey towards joining the Union, since no date for the opening of membership talks has been set yet. This is a signal that the country, which has a population of just 630,000, needs to speed up reforms. Montenegro is the fifth candidate country in line for membership, together with Croatia, Iceland, Macedonia and Turkey. To obtain a date for launching membership negotiations, Montenegro must meet seven conditions: - Harmonize Electoral Law in line with the recommendations of the OSCE-ODIHR and the Venice Commission; - Strengthen its administrative capacity and independence of the judiciary; - Fight corruption and organized crime; - Boost media freedom; - Increase co-operation with the civil sector, mostly NGOs; - Prevent discrimination; and - Find sustainable solutions to close the refugee camp on the outskirts of Podgorica. Montenegrins have also been told that lots of work remains before they join the EU. Passing laws is good, says the European Commission, but implementation matters more. Such criticism has not ruffled feathers in Podgorica. Officials assessed the Commission’s opinions and comments as “quite fair”. The European Parliament expects the negotiations to start at the latest after the publication of the 2011 commission progress report, provided Montenegro makes good progress in fulfilling the benchmarks set by the commission.

Key findings of the opinion on Montenegro:

Political criteria Montenegro has continued to make progress in addressing the political criteria. It has improved its legal framework and has strengthened its administrative and institutional capacity. Regarding human rights and the respect for and protection of minority groups, the legal and policy framework is largely in place and broadly corresponds to European and international standards. The institutional framework is largely adequate. However, there are gaps in implementation. Montenegro needs to effectively implement and enforce legislation in all fields. The main concerns relate to the following areas: effectiveness of anti-discrimination policies, freedom of expression and government relations with the civil society as well as the situation regarding displaced persons from Croatia, Bosnia and Herzegovina and Kosovo. Furthermore, Montenegro needs to intensify its efforts to consolidate its rule of law, in particular in the fight against corruption and organised crime, which still remain a serious problem. Montenegro plays a constructive role in maintaining regional stability and in fostering good neighbourly relations with other Western Balkan and EU countries. Economic criteria Montenegro has taken important steps towards establishing a functional market economy. To be considered as a functional market economy, Montenegro needs to further address internal and external imbalances, as well as weaknesses, notably in the financial sector and in the functioning of labour markets. Montenegro has achieved a good track record in the implementation of economic reforms and in implementing a broad domestic consensus on the fundamentals of economic policy. The free interplay of market forces has developed over the last decade through privatisation and the abolition of controls on prices.


Foreign investments have been attracted by the improved business environment. The Montenegrin economy remains very open and the level of trade and investment integration with the EU and the Western Balkan region is high. However, the global crisis unveiled significant internal and external imbalances which exposed the country and threatened its macroeconomic stability. The crisis also revealed vulnerabilities in the regulation and supervision of the banking sector, calling for the critical recapitalisation of banks. Persistent unemployment points to weaknesses in education and in vocational training systems, as well as to some problems regarding rigidity in the labour market. The country still has inadequate and insufficient energy and transport infrastructures. Persistent weaknesses in the rule of law and in the large informal sector have a negative effect on the business environment. EU legislation Montenegro has made further progress in aligning itself with European standards, particularly in certain areas of its internal market, in trade-related provisions, and in customs and taxation. However, additional efforts are needed for Montenegro to become aligned with EU legislation and to implement it effectively in the medium term, particularly regarding freedom of movement for workers, services and capital, public procurement, competition, financial services, information society and media, transport policy, energy, economic and monetary policy, consumerism and health protection. The country faces major challenges in implementing and enforcing legislation. Administrative and judicial capacities still remain very limited. The country needs to make sustained efforts to strengthen these in order to assume its obligations of membership during the medium-term.

January 2011 February January 2011

Company Presentation Company Presentation

Savills Montenegro is the largest international Real Estate Services Business and most trusted brand in Montenegro and offers comprehensive and isprofessional in the area of sales and marketing, market research, project consultancy, the largest services Besides the traditional real estate sales AD, project company and the subsidiary development management international and such services, combining local market knowledge and global expertise. Savills Montenegro model, Savills Montenegro together with of Orascom Development Holding was established in 2004, with a goal of developing a company would lead the way in the emerging market of Montenegro Real Estate Savills is currently that retained by some AG on market research as well as the as regards providing confidence to all levels of investors, offering wraparound service and providing a partnership model S e r v i c e s of the top projects in aMontenegro to masterplan/detailed design of Orascom to clients whereby our business is an extension of theirs, with the expected strength and quality of service and expertise. Business and the most trusted brand in provide planning, strategic development Premium Holiday Resort in Lustica.

Montenegro, and offers comprehensive and and research advice to the relevant State traditional real estate sales model, Savills professional services in the area of Besides sales the authorities in Montenegro and to typically In September In September 2010 2010 Savills Montenegro Savills Montenegro with Savills won a prestigious and marketing, market research, project international together developers, as well as toislocal Montenegro won a prestigious 5 star award in the currentlyand retained by somemedia of theontop awardofin the category consultancy, development management international theprojects market and 5 star category Best Real Estate Agency in in Montenegro provide planning,atstrategic RESIDENTIAL Real Estate Agency and such services, combining local market trends. to Under consultation the moment of Best Montenegro and was chosen to be the development and research to the East, relevant Montenegro and was knowledge and global expertise. Savills are clients from advice the Middle Russia in Best Real Estate Agency in Europe by State authorities in Montenegro and to typically to be the Best of Real Montenegro was established in 2004, and the UK and include some of the chosen the selection committee the prestigious international developers, well as in to local and Estate Agency in Europe by – Europe with a goal of developing a company that highest profile as projects Montenegro. International Property Awards international media onthe theemerging market and trends. Under consultation at the moment are the &selection committee would lead the way in market Africa Property Awards of 2010. Savills clients from the Middle East, Russia and the prestigious International Montenegro of Montenegro as regards providing the UK and include some of the highest profile projects Property Awards – Europe & confidence to inallMontenegro. levels of investors, From the Property consultancy perspective, we’ll Africa Awards 2010. offering a wraparound service and Savills Montenegro is an international associate continue to expand our offer to ensure that our providing a partnership model to clients of Savillsour- business the Premier clients arethe receiving the full shopping list of whereby is anProperty extension Services of From consultancy perspective, we’ll Company and Sales Brand globally with a services to allow them to formulate the right theirs, with the expected strength and continue to expand our offer to ensure tradition more than 150 years, and 259 offices strategic business quality ofofservice and expertise. that our clientsandareinvestment receiving decisions. the full in 27 countries, and one of the top 4 real estate Andshopping from list the ofsales perspective, we’re services to allow them to companies globally, and listed on the London continually inventing new methodologies in Savills Montenegro is an international A sample of our client base in Montenegro formulate the right strategic business and Stock Exchange. to attractdecisions. end users to Montenegro in an associate of Savills - the Premier Property is the Russian development companywhich investment And from the sales increasing competing global market place. Services Company and Sales Brand globally Metropol and the island of Sveti Marko,everperspective, we’re continually inventing We like to see ourselves as setting the pace of with a tradition of more than 150 years, in Tivat Bay. Here, Savills plays the role new methodologies in which to attract end and 259 offices in 27base countries, and one In of usersand to innovation MontenegroininMontenegro. an ever increasing development advising on thechange A sample of our client in Montenegro turn, Savills andmanager, Savills Montenegro of 4 real estate companies globally, also master plan, and brokered coordinating partners’ competing global market place. We like is the thetop Russian development company introduced the hotel Contact: and listed and on the Stock as setting the pace of activities asBanyan builders Metropol theLondon island of SvetiExchange. Marko, deal with the such six star TreeBovis HotelsLend to see ourselves and innovation in Montenegro. ARUP,global architects changeResearch in Tivat Bay. & Lease, Resortsengineering and is thefirm exclusive & Consultancy Woods and cost consultants DavisBul. Sv. Petra Cetinjskog 1/A, 81000 Podgorica sales agentBagot for the project – That’s what In turn, Savills Savills Contact Here, Savills plays the role of weLangdon. call our wraparound service. and We also T/F: +382 (0)20.243.515 E: & Montenegro also introduced brokered Research development manager, advising on the advise Lustica Development AD,and project Consultancy Bul. Sv. Petra Cetinjskog 1/A, 81000 Podgorica the hotel with the six star Banyan master plan, and coordinating partners’ company anddeal the subsidiary of Orascom E: Tree Hotels & ResortsAG and on is the exclusive T/F: +382 (0)20.243.515 activities such as builders Bovis Lend Development Holding market Sales & Marketing global sales agentasforthe the masterplan/ project – That’s P.C. Lease, engineering firm ARUP, architects research as well SalesMarinović, & Marketing 85318 Radanovići, Kotor T/F: +382 (0)32.302.308 what we call ofourOrascom wraparound service. P.C. Marinović, Woods Bagot and cost consultants Davis detailed design Premium 85318 Radanovići, Kotor E: (0)32.302.308 E: We also advise Lustica Development T/F: +382 Langdon. Holiday Resort in Lustica. BEST REAL ESTATE AGENCY EUROPE

MONTENEGRIN 2ND HOME MARKET - short overview Holiday home buyers are drawn to Montenegro for its attractive Mediterranean climate and natural beauty above all. Residential demand profile: The volume of property transactions in Montenegro peaked in 2007 at which point the onset of the global credit crisis saw UK and Irish buyers withdraw from the overseas property buying market as financing dried up, prices turned negative and confidence waned across Europe. In 2009, transaction levels shrank dramatically compared to their 2007 boom, however 2010 data for H1 only suggests a slight recovery in sales numbers. Buyers from eastern Europe have instead become the dominant force in the housing market, responsible for the vast majority of sales recorded by Savills Montenegro in 2008 (90%), 2009 (88%) and in 2010 (95%). This perceived dearth in supply

befitting buyers’ demand requirements is an important opportunity for potential new development coming to the market. It will be vital for developers to understand demand trends in the local area in order to effectively target buyers. At present, almost all demand is focussed on coastal locations. Current budget constraints and the fact that most buyers presently active in the market are not using mortgage financing to increase their spending power, mean that most demand is concentrated Nationality of buyers 2006-2010, Savills Montenegro transaction data

on compact apartment properties. Properties with proximity to the beach, with access to shopping areas, restaurants and bars are most sought after. In addition, property features such as balconies and terraces and parking provision are important in targeting today’s second home buyers.

levels and prices have seen some recovery in 2010, with transactions achieving almost €2,200/sqm (gross area) on average in 2010. Savills Montenegro achieved average price/sqm (€/gross area)

Residential pricing: The Montenegrin housing market has witnessed robust price appreciation in recent years, supported by a mixture of increased local demand and overseas interest in holiday homes in particular. Properties located in coastal areas lead the market in terms of values. According to Savills Montenegro data, prices peaked on average in 2007 at around €3,000/sqm. Similar to most overseas property destinations, the subsequent two years saw prices lose approximately a third of their value during the global credit crunch. However, both transaction


Expert’s opinion Montenegroberza in 2011 As is already common knowledge, Montenegro has been operating a single stock exchange since the beginning of this year. All rights and obligations remain as they existed previously before merging the two Montenegrin stock exchanges. It is important to emphasize that the current database that has been set up in Montenegroberza has emerged as a result of integrating the previous two databases. It is based on data that the stock exchange system used to operate previously, and is in full accordance with the decisions made by the Shareholders’ Assemblies and with an agreement that was made regarding merging the two exchange markets. The historical prices of securities have been achieved by merging the historical prices from both exchanges through the new accounting system. Thus, the current situation is actually a historical representation of this unique new capital market. Brokers and observers, as well as investors, who monitor the situation through vendors in Montenegroberza, are now using data from the new integrated database. The previous databases have been preserved in their integral form and can be accessed at any time by any interested parties, either directly via the internet or through the stock exchange upon request. Any orders that previously existed in either of the systems, and were active before the databases were merged, were preserved with all of their parameters on December 31st. Therefore they have been kept in an integral database and are located with any previous priorities, both time and price, which is in accordance with the Tock Exchange Rules of Procedure.

Montenegroberza has big plans for the year ahead... It aims to raise the level of market liquidity and to implement a new information system project, funded by the government of Luxemburg. This is expected to start soon. The project management has been entrusted to the Luxemburg stock exchange, while the technical implementation will be carried out in cooperation with the Belgrade Stock Exchange. The system has been designed in accordance with world standards and functions in all areas in accordance with MIFID, which is of crucial importance to Montenegro as future member of the European Union. Apart from the implementation of the new system, it is of vital importance for Montenegro to have the Luxemburg stock exchange as its partner. According to many parameters it is rated as being the best in the world. This is just one in a series of projects that have been planned to take place through this cooperation. This year’s plan also envisages the development of a new index in cooperation with the Vienna stock exchange, with which Montenegroberza has already worked successfully over a long period of time. This index will be calculated and published at the Vienna stock exchange and will consequently directly expose companies in the index to monitoring by world investors. In addition to this, it has been planned that at least one Montenegrin company should appear in the index that includes South Eastern European countries, and which will be calculated and published by the world known index provider Dow Jones.

It is also intended to enrich the market with new material, i.e. derivative securities, which will expand the range of products on offer and will refresh the market. Implementation of the project is planned to take place with cooperation from European agencies that are specialized in this segment of the market.The first foreign listing in the market will also be worked on through the IPO process. The Montenegroberza web site will be enriched by increasing the quality of its reporting in terms of data necessary for performing the analyses of investments, particularly in risk management. Some educational activities are also planned in order to enrich knowledge regarding the importance of corporate governance, and to increase the number of companies that accept the Corporate Governance Codex in Montenegro. The corporate governance sector is of vital importance in joint stock companies and it is directly related to the stock exchange market as it directly contributes to the KODEKS protection of shareholders' interests. Code KORPORATIVNOG UPRAVLJANJA of Corporate Governance for Montenegro U CRNOJ GORI was formed in May 2009, as a result of cooperation between the Montenegrin Stock Exchange and International Finance Corporation (IFC). podržan od strane

Testing of a Scorecard methodology in Montenegro In cooperation of Montenegroberza and International Financial Corporation (IFC) within the project "Promotion of Corporate Governance in Montenegro” the testing of a Scorecard methodology was carried out in six companies. Montenegroberza supported and recommended this kind of testing to the listed compaies in Montenegro. The code was accepted by five listed companies, and not all of them tested the actual level of application of standards. Six listed companies agreed to test the actual level of corporate governance: Plantaže JSC, Željeznička infrastruktura JSC, Željeznički prevoz JSC, Montecargo JSC, Pobjeda JSC and Zetatrans JSC. IFC provided consultations for those companies free of charge through inhouse workshops. Testing of scorecard methodology gave some results and highlighted some problems regarding the actual situation of Corporate Governance in Montenegrin companies. Scorecard show that the most problematic areas were: supervision and control, transparency, and Board of Directors (election of members). Prepared by: Dejana Suskavcevic, MSc, Chief Executive Officer


February 2011

We Introduce

Climate Change and Global Warming Over recent decades, the seriousness of the climate change issue and the consequences it presents have become key factors concerning future social and economic growth, and development. There is no longer any dilemma about whether climate change exists or not. The question now concerns the extent to which its effects »are felt« and, more specifically, to try to assess its future impact on overall growth and development potential. We are witnesses to the fact that climate change is being manifested through frequent floods, droughts and fires all over the world. Consequently we will inevitably face a rise in sea-level, a melting of ice and snow, an increase in air and ocean temperatures, and changes in flora and fauna, etc. These occurrences will have a great influence on many aspects of economic, social and environmental systems. This is one of the main reasons that climate change is a subject of concern, not only for meteorologists, climatologists, and environmentalists, but also for other scientists and, of course, for economists.


An increase in global air temperature is one of the most critical problems faced in the 21st century – a problem that causes climate change and which could either reduce or annul the levels of social and economic development that have been attained, and destroy the efforts of underdeveloped countries in achieving their long awaited progress. Over the last 100 years, an increase of 0.7°C on average has been recorded in global air temperature, while in Europe an increase of 1°C has been recorded. The effects of this have already become apparent, and the consequential damage can be quantified in terms of billions of dollars, with an ever increasing growth rate. Climate change or global warming is caused by the accumulation of greenhouse gases (GHG) in the atmosphere. Carbon-dioxide (CO2) contributes the most to the creation of this effect which occurs as a result of fossil fuels being burned. This is the result of human activity and industrial processes. In relation to pre-industrial levels, the concentration of greenhouse gases has increased by about 55%, showing a rate of increase that suggests that it will have doubled by 2050. The most modern models of computer climate simulation estimate that the doubled concentration of CO2 would cause an increase in global temperature somewhere in the range between 1.5°C and 5°C, and in Europe possibly as much as between 2°C and 6.3°C. Further demographic and economic growth in the first group of developing countries would contribute to an increase in the level of greenhouse gases. This would, in turn, increase the risk of climate change and other irreversible consequences.

In order to minimize the influence of the situation outlined above, it is necessary to define a threshold (limit) for dangerous climate change: for example, an increase in the average global air temperature to 20°C above the pre-industrial level of 450ppm as a goal to stabilize atmospheric concentrations of carbon dioxide. Achieving such a goal would cost about 1.6% of the average world GDP by 2030. Developed countries, on average, contribute 80% to total greenhouse gas emissions. The cost of global air temperature would increase from 20C to 2.50C will in largest percentage be distributed through the poorest countries. Thus, African countries would suffer a reduction in GDP of between 1% and 9%. The least damaging reduction in GDP would be about 4% of GDP.


The greatest challenge in facing climate change is to limit the emission of greenhouse gases in the future. Developing countries strongly object to this, because due to the emissions that the most developed countries have caused, they will need to adjust their economies which are mostly based on carbon intensive technology. A reorientation towards renewable energy sources and the application of so called ’green’ technology requires significant financial resources that may mitigate their chances for further growth and development. The latest analysis shows that to substitute fuels that create greenhouse gases could cost between 1% and 3% of the world GDP. The global character and nature of climate change requires a joint and coordinated effort. The only way that this is possible is to meet the challenges that climate change presents and to do this in an efficient and cost effective manner with the leas possible risks. Prepared by: Slavica Nikolić, MSc, CEED Consulting


Coming Up… IFC event: Cogeneration PPP Regional Workshop, Zagreb The Public Private Partnerships (“PPP”s) Closed Session Workshop in the Cogeneration Sector will be held on February 23, 2011 in Zagreb, Croatia, at the Sheraton Hotel. This event will be organised in cooperation of IFC, a member of the World Bank Group, with the Swiss State Secretariat for Economic Affairs (“SECO”). The Workshop should raise awareness and update the invited public-sector participants from Southeast Europe about different ways of involving the private sector in cogeneration development, and provide a forum for the participants to discuss issues regarding the implementation of PPPs, and learn from lessons of previous experiences. For more information please visit:

USA-Balkan Business Summit March 23-24, 2011, Baltimore, USA

The US-Balkans Business Summit is the first trade and investment summit between the United States and the Western Balkans ever to be held in the United States, with two full days to interact face-to-face with senior public officials and private business leaders interested in doing business in Western Balkans. The summit will assist in developing trade and investment between the Western Balkans and the United States, and will focus on a cross-section of industries with growing potential in the Western Balkans, including, but not limited to, energy, defense and aerospace, information technology, manufacturing, tourism, transportation, and infrastructure. The goals of the US – Balkans Business Summit are: to promote a dialogue between the business world and the Western Balkan political scene; to enable American and Western Balkan businesses to meet decision-makers face-to-face and to enhance the visibility of their business; to improve participants’ knowledge and understanding of Western Balkan affairs; and to strengthen an environment of confidence amongst government and private business leaders, non-governmental organizations, and academics, in order to reinforce the United States and Western Balkan economic model. Montenegrin Investment Promotion Agency (MIPA) is the main partner to US-Balkan Business Council in organizing this event. For more details please see:

CEED’s Strategic Partner

Affiliate of US Chamber of Commerce

Chief Editor

Global Entrepreneurship Week Global Entrepreneurship Week stands for the place where an entrepreneurial ecosystem has started to take shape around the world, connecting people across borders to unleash their ideas and transform innovation into reality—in turn growing economies and expanding human welfare. In March 2009, the Kauffman Foundation brought together the host organizations from nearly 60 nations to create the first ever Global Entrepreneurship Congress at its headquarters in Kansas City. One year later, the Congress convened in Dubai with more than 90 countries represented and an all-star lineup of speakers including Prime Minister H.E. Nika Gilauri of Georgia; Sarah Ferguson, The Duchess of York; Carl Schramm, President & CEO, Kauffman Foundation; Hartmut Ostrowski, Chairman & CEO, Bertelsmann AG; Sun Young Kang, the former Foreign Minister of Korea; Suhas Gopinath, CEO & President, Globals Inc.; and, Tom Scott, co-founder of Nantucket Nectars. This year, global leaders, entrepreneurs and intermediary organizations from more than 100 countries will again participate in the Global Entrepreneurship Congress, co-hosted by the Kauffman Foundation and the Entrepreneurship Foundation for Graduates in Shanghai, China. For more information please visit: On this event, Montenegro will be represented by the Center for Entrepreneurship and Economic Development (CEED) from Podgorica.

After 15 years of experience, today CEED Consulting is the leading business consulting company in Montenegro which helps clients improve their business operations, further develop and perfect both their service and product and meet the need of their customers. We integrate our business development and project management services, providing solutions for setting up and growing your business activities in Montenegro. Focusing on customer care, our team emphasizes quality of service, which we are continually striving to improve. Loyalty and dedication transpire through our unique and professional approach to advising our clients. Implementing international standards of business practice, CEED Consulting relies on its expert knowledge of the local market to provide tailored solutions based on accurate and timely information. We are professional, flexible and different! And always dedicated to you! CEED Consulting Team


CEED Consulting

CEED Consulting

Ivana Božanović MBO Team Dragana Radević Mihailo Zečević Darko Konjević Vesna Bojanović Jelena Međedović Jasna Žarković Biljana Sekulić Slavica Nikolić ASSOCIATE Charlotte Rimmer, Editor

Front page picture: Durmitor mountain mostly belongs to Žabljak municipality. It has 48 peaks above 2000 m, while the highest one is Bobotov Kuk (2,522 m). Printing: Montcarton, Podgorica

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